Last checked at 26 Feb 2009 07:00
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26 February 2009
Hochschild Mining exercises option to increase stake in Gold Resource Corporation
Hochschild exercises option to purchase a further 4.33 million GRC shares for $12.9 million or $3 per share, representing a 41% discount to the closing price on 23 February 2009
Hochschild to appoint a director to GRC board
Investment provides exposure to high grade, low cost ounces in a mining friendly country with significant mineral potential
Hochschild Mining plc ("Hochschild") is pleased to announce the exercise of its option to purchase a further 4.33 million shares of Gold Resource Corporation ("GRC") for $12.9 million or $3 per share, representing a 41% discount to the closing price on 25 February 2009. On completion of the purchase, which will be funded from existing cash, Hochschild will have a 14.6% interest in GRC, a US OTC traded underground precious metals mining company with a number of prime development projects in southern Mexico. With its increased ownership, Hochschild has the right to appoint a director to the GRC board.
This strategic investment creates an additional operational cluster for Hochschild, providing exposure to high grade, low cost ounces in a mining friendly country with significant mineral potential. GRC will use the proceeds from the transaction to fund development of its flagship property, El Aguila, which is currently expected to commence production by mid 2009 at 70 thousand ounces of gold per year (4.2 million silver equivalent ounces), subject to obtaining remaining permits and regulatory approval. The deposit comprises 75% gold and silver and 25% zinc, copper and lead at current prices.
Miguel Aramburú, Chief Executive Officer of Hochschild Mining plc, commented;
"We are delighted to announce our increased investment in GRC which strengthens our position in a mineral rich and mining friendly region of the Americas, in line with our cluster consolidation strategy. We have been extremely impressed with the quality of GRC's assets and the speed at which the El Aguila property is being developed. We look forward to working with GRC's highly experienced management team to realise the significant potential of El Aguila as well as the other projects in their impressive pipeline."
Hochschild and GRC are also evaluating the development of La Arista, GRC's Au-Ag polymetalic deposit which is adjacent to El Aguila. In addition, GRC has three other early stage projects in its pipeline, all of which show indications of potentially significant mineralisation; Las Margaritas and Solaga, which are high grade silver deposits and El Rey a high grade gold deposit, all in the same region.
Today's announcement follows Hochschild's initial 5% investment in GRC which was completed in December 2008. Hochschild has the right to increase its stake to 40% in the open market by December 2010, with the support of the GRC board. After this time, Hochschild can purchase additional shares in GRC without restriction. In the event that Hochschild increases its stake to 40%, it is entitled to a total of two out of five board nominations.
William W. Reid, president of Gold Resource Corporation, stated;
"We are pleased and impressed with the technical assessments, opinions and suggestions made by Hochschild's geologists and mining and milling personnel. Hochschild's professionalism and expertise confirm our belief that we have chosen the right strategic alliance partner. As a significant shareholder, Hochschild's backing, both financially and technically, strengthens Gold Resource Corporation's ability to build value for all shareholders. This alliance promotes a common goal to achieve significant production at the El Aguila project at the earliest possible date. We believe the increase of Hochschild's strategic investment in GRC further underscores the significant potential of our El Aguila Project."
For more information on GRC's projects, visit www.goldresourcecorp.com
Enquiries:
Hochschild Mining plc
Isabel Lutgendorf +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Robin Walker +44 (0)20 7251 3801
Public Relations
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About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L for Reuters / HOC LN for Bloomberg) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild currently operates five underground epithermal vein mines, four located in southern Peru and one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has over sixteen long-term prospects throughout the Americas. Hochschild has over forty years experience in the mining of precious metal epithermal vein deposits.
For further information please visit www.hochschildmining.com
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About GRC
Gold Resource Corporation is a mining company focused on production and pursuing development of gold and silver projects that feature low operating costs and produce high returns on capital. The Company has 100% interest in four potential high-grade gold and silver properties in Mexico's southern state of Oaxaca. The company has 36,087,556 shares outstanding and no warrants. For more information, please visit GRC's website, located at www.Goldresourcecorp.com and read the Company's 10-K for an understanding of the risk factors involved.
Certain statements in this announcement are or may be forward looking statements regarding Hochschild Mining plc's financial position and results, business strategy, production, plans and objectives. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group's control. As a result, the Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. Except as required by applicable law or regulation, the Group does not undertake any obligation to update or change any forward-looking statements contained in this announcement or any other forward-looking statement it may make.
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